AN ACT

 

1Amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated
2Statutes, providing for taxation of natural gas drilling and
3for transfers and distributions.

4The General Assembly of the Commonwealth of Pennsylvania
5hereby enacts as follows:

6Section 1. Title 58 of the Pennsylvania Consolidated
7Statutes is amended by adding a chapter to read:

8CHAPTER 37

9EFFECTS OF NATURAL GAS DRILLING

10Sec.

113701. Scope of chapter.

123702. Definitions.

133703. Imposition of tax.

143704. Return and payment.

153705. Natural gas severance tax registration.

163706. Meters.

173707. Assessments.

183708. Time for assessment.

13709. Extension of assessment period.

23710. Reassessments.

33711. Interest.

43712. Penalties.

53713. Criminal acts.

63714. Abatement of additions or penalties.

73715. Bulk and auction sales.

83716. Collection upon failure to request reassessment, review
9or appeal.

103717. Tax liens.

113718. Tax suit reciprocity.

123719. Service.

133720. Refunds.

143721. Refund petition.

153722. Rules and regulations.

163723. Recordkeeping.

173724. Examinations.

183725. Unauthorized disclosure.

193726. Cooperation with other governments.

203727. Bonds.

213728. Accounts established.

223729. Distributions and transfers.

23§ 3701. Scope of chapter.

24This chapter relates to the ability of all counties within
25this Commonwealth to ameliorate the effects of natural gas
26drilling that occur within the county's borders.

27§ 3702. Definitions.

28The following words and phrases when used in this chapter
29shall have the meanings given to them in this section unless the
30context clearly indicates otherwise:

1"Account." The Natural Gas Severance Tax Account.

2"Accredited laboratory." A facility engaged in the testing
3and calibration of scientific measurement devices and certified
4by the Department of Environmental Protection as having met the
5department's standards for accreditation.

6"Association." A partnership, limited partnership or another
7form of unincorporated enterprise owned or conducted by two or
8more persons.

9"Base rate." The rate under section 3703(b) (relating to
10imposition of tax).

11"Coal bed methane." Gas which can be produced from coal
12beds, coal seams, mined-out areas or gob wells.

13"Corporation." A corporation, joint stock association,
14limited liability company, business trust or another
15incorporated enterprise organized under the laws of this
16Commonwealth, the United States or another state, territory,
17foreign country or dependency.

18"Department." The Department of Revenue of the Commonwealth.

19"Meter." A device to measure the passage of volumes of gases
20or liquids past a certain point.

21"Municipality." A city, borough, incorporated town or
22township.

23"Natural gas." A fossil fuel consisting of a mixture of 
24hydrocarbon gases, primarily methane, possibly including ethane, 
25propane, butane, pentane, carbon dioxide, oxygen, nitrogen and 
26hydrogen sulfide and other gas species. The term includes 
27natural gas from oil fields known as associated gas or casing 
28head gas, natural gas fields known as nonassociated gas, coal 
29beds, shale beds and other formations. The term does not include 
30coal bed methane.

1"Nonproducing site." A point of severance that is not
2capable of producing natural gas in paying quantities.

3"Paying quantities." Profit to the producer over the
4producer's current operating expenses.

5"Person." A natural person or a corporation, fiduciary,
6association or other entity. The term includes the Commonwealth,
7its political subdivisions, instrumentalities and authorities.
8If the term is used in a manner prescribing and imposing a
9penalty or imposing a fine, imprisonment or both, the term
10includes a member of an association and an officer of a
11corporation.

12"Producer." A person who engages or continues within this
13Commonwealth in the business of severing natural gas for sale,
14profit or commercial use. The term does not include a person who
15severs natural gas from a storage field.

16"Producing site." A point of severance capable of producing
17natural gas in paying quantities.

18"Reporting period." A calendar month in which natural gas is 
19severed.

20"Secretary." The Secretary of Revenue of the Commonwealth.

21"Sever." To extract or otherwise remove natural gas from the
22soil or water of this Commonwealth.

23"Severance." The extraction or other removal of natural gas
24from the soil or water of this Commonwealth.

25"Severing." Extracting or otherwise removing natural gas
26from the soil or water of this Commonwealth.

27"Storage field." A natural formation or other site that is
28used to store natural gas that did not originate from and has
29been injected into the formation or site.

30"Tax." The natural gas severance tax imposed under this

1chapter.

2"Tax rate adjustment index." The amount calculated under
3section 3703(b) (relating to imposition of tax) by which the
4rate of the tax imposed under section 3703(b) is adjusted
5annually.

6"Taxpayer." A person subject to the tax imposed under this
7chapter.

8"Unit." A thousand cubic feet of natural gas measured at the 
9wellhead at a temperature of 60 degrees Fahrenheit and an 
10absolute pressure of 14.73 pounds per square inch in accordance 
11with American Gas Association Standards and according to Boyle's 
12Law for the measurement of gas under varying pressures with 
13deviations as follows:

14(1) The average absolute atmospheric pressure shall be
15assumed to be 14.4 pounds to the square inch, regardless of
16elevation or location of point of delivery above sea level or
17variations in atmospheric pressure from time to time.

18(2) The temperature of the gas passing the meters shall
19be determined by the continuous use of a recording
20thermometer installed to properly record the temperature of
21gas flowing through the meters. The arithmetic average of the
22temperature recorded each 24-hour day shall be used in
23computing gas volumes. If a recording thermometer is not
24installed or is installed and not operating properly, an
25average flowing temperature of 60 degrees Fahrenheit shall be
26used in computing gas volume.

27(3) The specific gravity of the gas shall be determined
28annually by tests made by the use of an Edwards or Acme
29gravity balance or at intervals as found necessary in
30practice. Specific gravity determinations shall be used in

1computing gas volumes.

2(4) The deviation of the natural gas from Boyle's Law
3shall be determined by annual tests or at other shorter
4intervals as found necessary in practice. The apparatus and
5method used in making the test shall be in accordance with
6recommendations of the National Bureau of Standards or Report
7No. 3 of the Gas Measurement Committee of the American Gas
8Association or amendments thereto. The results of the tests
9shall be used in computing the volume of gas delivered under
10this chapter.

11"Wellhead meter." A meter placed at a producing or 
12nonproducing site to measure the volume of natural gas severed 
13for which a wellhead meter certification has been issued.

14"Wellhead meter certification." A report issued by an
15accredited laboratory certifying the accuracy of a wellhead
16meter.

17§ 3703. Imposition of tax.

18(a) Establishment.--There is levied a privilege tax on each
19producer that severs natural gas.

20(b) Rate.--The tax imposed in subsection (a) shall be 5% of
21the gross value of units severed at the wellhead during a
22reporting period, plus 4.6¢ per unit severed.

23§ 3704. Return and payment.

24(a) Requirement.--Each producer is required to file a return 
25with the department, on a form prescribed by the department, 
26which shall include all of the following:

27(1) The number of natural gas units severed by the 
28producer for the reporting period.

29(2) The number of producing sites used by the producer 
30for the severance of natural gas in each county and
 

1municipality.

2(3) The amount of tax due under section 3703 (relating
3to imposition of tax).

4(b) Filing.--The return required by subsection (a) shall be 
5filed with the department within 15 days following the end of a 
6reporting period.

7(c) Deadline.--The tax imposed under section 3703 is due on
8the day the return is required to be filed and becomes
9delinquent if not remitted to the department by that date.

10§ 3705. Natural gas severance tax registration.

11(a) Application.--Before a producer severs natural gas in
12this Commonwealth, the producer shall apply to the department
13for a natural gas severance tax registration certificate.

14(b) Application fee.--The department may charge an
15application fee to cover the administrative costs associated
16with the application and registration process. If the department
17charges an application fee, the fee must be paid before the
18department may issue a registration certificate.

19(c) Declaration.--

20(1) The producer shall include in the application a 
21declaration of all producing sites and nonproducing sites 
22used by the producer for the severance of natural gas. The 
23declaration shall include copies of wellhead meter 
24certifications for each site. The producer is required to 
25update the declaration when any of the following occur:

26(i) The producer adds or removes a producing site or
27nonproducing site in this Commonwealth.

28(ii) There is a change in the status of a producing
29site or nonproducing site.

30(iii) When the producer uses a different accredited
 

1laboratory to issue a wellhead meter certification.

2(2) The producer shall update the declaration within 30
3days after a calendar month in which a change to the
4declaration occurs.

5(d) Issuance.--Except as provided in subsection (c), after
6the receipt of an application, the department shall issue a
7registration certificate under subsection (a). The registration
8certificate shall be nonassignable. A registrant shall be
9required to renew the registration certificate and wellhead 
10meter certification on a staggered renewal system established by
11the department. After the initial staggered renewal period, a 
12registration certificate or a wellhead meter certification
13issued shall be valid for a period of five years.

14(e) Refusal, suspension or revocation.--

15(1) The department may refuse to issue, suspend or
16revoke a registration certificate if the applicant or
17registrant has not:

18(i) Filed required State tax reports.

19(ii) Paid State taxes not subject to a timely
20perfected administrative or judicial appeal or subject to
21a duly authorized deferred payment plan.

22(2) The department shall notify the applicant or
23registrant by first class mail of a refusal, suspension or
24revocation. The notice shall contain a statement that the
25refusal, suspension or revocation may be made public.

26(3) An applicant or registrant aggrieved by the
27determination of the department may file an appeal under the
28provisions for administrative appeals in the act of March 4,
291971 (P.L.6, No.2), known as the Tax Reform Code of 1971. If
30a suspension or revocation is appealed, the registration

1certificate shall remain valid pending a final outcome of the
2appeals process.

3(4) Notwithstanding sections 274, 353(f), 408(b), 603,
4702, 802, 904 and 1102 of the Tax Reform Code of 1971 or
5another provision of law, if no appeal is taken or if an
6appeal is taken and denied at the conclusion of the appeal
7process, the department may disclose the following:

8(i) The identity of a producer.

9(ii) The fact that the producer's registration
10certificate has been refused, suspended or revoked under
11this subsection.

12(iii) The basis for refusal, suspension or
13revocation.

14(f) Violation.--

15(1) A person severing natural gas in this Commonwealth 
16without holding a valid registration certificate under 
17subsection (b) commits a summary offense and, upon 
18conviction, shall be sentenced to pay a fine of not less than 
19$300 nor more than $1,500.

20(2) If the person convicted defaults in the payment of
21the fine, the person shall be sentenced to imprisonment for
22not less than five days and not more than 30 days.

23(3) The penalties imposed under this subsection shall be
24in addition to other penalties imposed under this chapter.

25(4) For purposes of this subsection, the severing of 
26natural gas during a calendar day shall constitute a separate 
27violation.

28(5) The secretary may designate employees of the 
29department to enforce this subsection. The employees shall 
30exhibit proof of and be within the scope of the designation
 

1when instituting proceedings as provided by the Pennsylvania 
2Rules of Criminal Procedure.

3(g) Failure to obtain registration certificate.--Failure to
4obtain or hold a valid registration certificate shall not
5relieve a person from liability for the tax imposed by this
6chapter.

7§ 3706. Meters.

8A producer shall provide for and maintain a discrete wellhead 
9meter where natural gas is severed. A producer shall ensure that 
10the meters are maintained according to industry standards. A 
11wellhead meter installed after the effective date of this 
12section shall be a digital meter.

13§ 3707. Assessments.

14(a) Authorization and requirement.--The department shall
15make an inquiry, determination and assessment of the tax imposed
16under this chapter, including interest, additions and penalties
17imposed under this chapter.

18(b) Notice.--The notice of assessment and demand for payment 
19shall be mailed to the taxpayer. The notice shall set forth the 
20basis of the assessment. The department shall send the notice of 
21assessment to the taxpayer at the taxpayer's registered address 
22via certified mail if the assessment increases the taxpayer's 
23tax liability by at least $300. If the taxpayer's assessment is 
24increased by less than $300, the notice of assessment may be 
25sent via regular mail.

26§ 3708. Time for assessment.

27(a) Requirement.--An assessment under section 3707 (relating
28to assessments) shall be made within three years after the date
29when the return under section 3704 (relating to return and
30payment) is filed or the end of the year in which the tax

1liability arises, whichever shall occur last. For the purposes
2of this subsection and subsection (b), a return filed before the
3last day prescribed for the filing period shall be considered as
4filed on the last day.

5(b) Exception.--If the taxpayer underpays the correct amount
6of the tax due by 25% or more, the tax may be assessed within
7six years after the date the return was filed.

8(c) Intent to evade.--If no return is filed or where the
9taxpayer files a false or fraudulent return with intent to evade
10the tax imposed under this chapter, the assessment may be made
11at any time.

12(d) Erroneous credit or refund.--Within three years of the
13granting of a refund or credit or within the period in which an
14assessment or reassessment may have been issued by the
15department for the taxable period for which the refund was
16granted, whichever period shall last occur, the department may
17issue an assessment to recover a refund or credit made or
18allowed erroneously.

19§ 3709. Extension of assessment period.

20Notwithstanding the provisions of this chapter, the 
21assessment period may be extended if a taxpayer has provided 
22written consent before the expiration of the period provided in 
23section 3708 (relating to time for assessment) for a tax 
24assessment. The amount of tax due may be assessed at any time 
25within the extended period. The period may be extended further 
26by subsequent written consents made before the expiration of the 
27extended period.

28§ 3710. Reassessments.

29A taxpayer against whom an assessment is made may petition 
30the department for a reassessment under Article XXVII of the act
 

1of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 
21971.

3§ 3711. Interest.

4The department shall assess interest on delinquent tax at the
5rate prescribed under section 806 of the act of April 9, 1929
6(P.L.343, No.176), known as The Fiscal Code.

7§ 3712. Penalties.

8The department shall enforce the following penalties:

9(1) A penalty against a producer without a natural gas 
10severance tax registration certificate. The penalty shall be 
11$1 for each unit severed without a valid registration 
12certificate. The department may assess the penalty separately 
13from or in conjunction with an assessment of the natural gas 
14severance tax.

15(2) A penalty against a producer for failure to timely
16file a return as required under section 3704 (relating to
17return and payment). The penalty shall be 5% of the tax
18liability to be reported on the return for each day beyond
19the due date that the return is not filed.

20(3) A penalty against the producer for a willful failure
21to timely file a return. The penalty shall be 200% of the tax
22liability required to be reported on the return.

23(4) A penalty against a producer for failure to timely
24pay the tax as required under section 3704(c). The penalty
25shall be 5% of the amount of tax due for each day beyond the
26payment date that the tax is not paid.

27§ 3713. Criminal acts.

28(a) Fraudulent return.--A person with intent to defraud the
29Commonwealth, who willfully makes or causes to be made a return
30required under this chapter which is false, commits a

1misdemeanor and shall, upon conviction, be sentenced to pay a
2fine of not more than $2,000 or to imprisonment for not more
3than three years, or both.

4(b) Other crimes.--

5(1) Except as provided under subsection (a), a person 
6commits a misdemeanor and shall, upon conviction, be 
7sentenced to pay a fine of not more than $1,000 and the cost 
8of prosecution or to imprisonment for not more than one year, 
9or both, for any of the following:

10(i) Willfully failing to timely remit the tax to the
11department.

12(ii) Willfully failing or neglecting to timely file
13a return or report required by this chapter.

14(iii) Refusing to timely pay a tax, penalty or
15interest imposed under this chapter.

16(iv) Willfully failing to preserve the person's
17books, papers and records as directed by the department.

18(v) Refusing to permit the department or the
19department's authorized agents to examine the person's
20books, records or papers.

21(vi) Knowingly making an incomplete, false or 
22fraudulent return or report.

23(vii) Preventing or attempting to prevent the full
24disclosure of the amount of natural gas severance tax
25due.

26(viii) Providing a person with a false statement as 
27to the payment of the tax imposed under this chapter with 
28respect to a pertinent fact.

29(ix) Making, uttering or issuing a false or
30fraudulent statement.

1(2) The penalties imposed by this section shall be in
2addition to other penalties imposed by this chapter.

3§ 3714. Abatement of additions or penalties.

4Upon the filing of a petition for reassessment or a petition
5for refund by a taxpayer under this chapter, additions or
6penalties imposed upon the taxpayer under this chapter may be
7waived or abated in whole or in part where the petitioner
8establishes that the petitioner acted in good faith, without
9negligence and with no intent to defraud.

10§ 3715. Bulk and auction sales.

11A person who does any of the following shall be subject to
12section 1403 of the act of April 9, 1929 (P.L.343, No.176),
13known as The Fiscal Code:

14(1) Sells or causes to be sold at auction 51% or more of 
15a stock of goods, wares or merchandise, fixtures, machinery, 
16equipment, buildings or real estate involved in a business 
17for which the person holds a registration certificate or is 
18required to obtain a registration certificate under the 
19provisions of this chapter.

20(2) Sells or transfers in bulk 51% or more of a stock of 
21goods, wares or merchandise, fixtures, machinery, equipment, 
22buildings or real estate involved in a business for which the 
23person holds a registration certificate or is required to 
24obtain a registration certificate under the provisions of 
25this chapter

26§ 3716. Collection upon failure to request reassessment, review
27or appeal.

28(a) Power of department.--The department may collect the tax 
29imposed under this chapter:

30(1) If an assessment of the tax is not paid within 30

1days after notice to the taxpayer when no petition for
2reassessment has been filed.

3(2) Within 60 days of the reassessment, if no petition
4for review has been filed.

5(3) If no appeal has been made, within 30 days of:

6(i) the Board of Finance and Revenue's decision on a
7petition for review; or

8(ii) the expiration of the board's time for acting
9upon the petition.

10(4) In any case of judicial sale, receivership,
11assignment or bankruptcy.

12(b) Prohibition.--

13(1) Except as provided in paragraph (2), in a case for 
14the collection of tax under subsection (a), the taxpayer 
15against whom the tax was assessed shall not be permitted to 
16set up a ground of defense that might have been determined by 
17the department, the Board of Finance and Revenue or the 
18courts.

19(2) The defense of failure of the department to mail
20notice of assessment or reassessment to the taxpayer and the
21defense of payment of assessment or reassessment may be
22raised in proceedings for collection by a motion to stay the
23proceedings.

24§ 3717. Tax liens.

25(a) Lien imposed.--

26(1) If a taxpayer neglects or refuses to pay the tax 
27imposed under this chapter for which the taxpayer is liable 
28under this chapter after demand, the amount, including 
29interest, addition or penalty, together with additional costs 
30that may accrue, shall be a lien in favor of the Commonwealth
 

1upon the real and personal property of the taxpayer but only 
2after the property has been entered and docketed of record by 
3the prothonotary of the county where the property is 
4situated.

5(2) The department may transmit to the prothonotaries of 
6the respective counties certified copies of all liens imposed 
7under this section.

8(3) A prothonotary receiving a lien shall enter and
9docket the property of record to the office of the
10prothonotary. The lien shall be indexed as judgments are
11indexed. A prothonotary may not require the payment of costs
12incidental to the entry as a condition of the entry.

13(b) Priority of lien and effect on judicial sale.--Except
14for the costs of the sale and the writ upon which the sale was
15made and real estate taxes and municipal claims against the
16property, a lien imposed under this section shall have priority
17from the date of the recording and shall be fully paid and
18satisfied out of the proceeds of the judicial sale of property
19subject to the lien, before another obligation, judgment, claim,
20lien or estate to which the property may subsequently become
21subject, and shall be subordinate to mortgages and other liens
22existing and duly recorded or entered of record prior to the
23recording of the lien.

24(c) No discharge by sale on junior lien.--

25(1) For a judicial sale of property subject to a lien
26imposed under this section, upon a lien or claim over which
27the lien imposed under this section has priority, shall
28discharge the lien imposed under this section to the extent
29that the proceeds are applied to the payment. No inquisition
30or condemnation upon a judicial sale of real estate made by

1the Commonwealth under this chapter may occur.

2(2) A lien shall continue in full force and effect as to
3the balance remaining unpaid as provided in the act of April
49, 1929 (P.L.343, No.176), known as The Fiscal Code.

5(3) A writ of execution may directly issue upon the lien
6without the issuance and prosecution to judgment of a writ of
7scire facias. Not less than ten days before issuance of an
8execution on the lien, notice of the filing and the effect of
9the lien shall be sent by registered mail to the taxpayer at
10the taxpayer's last known post office address.

11(4) A lien shall have no effect upon a stock of goods,
12wares or merchandise regularly sold or leased in the ordinary
13course of business by the taxpayer against whom the lien has
14been entered, unless a writ of execution has been issued and
15a levy made upon the stock of goods, wares and merchandise.

16(d) Duty of prothonotary.--A willful failure of a
17prothonotary to carry out a duty imposed upon the prothonotary
18by this section shall be a misdemeanor. Upon conviction, the
19prothonotary shall be sentenced to pay a fine of not more than
20$1,000 and the cost of prosecution or to imprisonment for not
21more than one year, or both.

22(e) Priority.--

23(1) Except as provided in this chapter, the
24distribution, voluntary or compulsory, in receivership,
25bankruptcy or otherwise of the property or estate of a
26person, tax imposed under this chapter which is due and
27unpaid and are not collectible under section 225 of the act
28of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
29of 1971, shall be paid from the first money available for
30distribution in priority to all other claims and liens,

1except priority to a claim to the Federal Government.

2(2) A person charged with the administration or
3distribution of the property or estate who violates the
4provisions of this section shall be personally liable for the
5tax imposed by this chapter which is accrued and unpaid and
6chargeable against the person whose property or estate is
7being administered or distributed.

8(f) Other remedies.--Subject to the limitations contained in
9this chapter as to the assessment of taxes, nothing contained in
10this section shall be construed to restrict, prohibit or limit
11the use by the department in collecting taxes due and payable of
12another remedy or procedure available at law or equity for the
13collection of debts.

14§ 3718. Tax suit reciprocity.

15The courts of this Commonwealth shall recognize and enforce a 
16liability for natural gas severance or extraction tax lawfully 
17imposed by another state, if the other state recognizes and 
18enforces the tax imposed under this chapter.

19§ 3719. Service.

20(1) A producer shall be deemed to have appointed the 
21Secretary of the Commonwealth the producer's agent for the 
22acceptance of service of process or notice in a proceeding 
23for the enforcement of the civil provisions of this chapter 
24and service made upon the Secretary of the Commonwealth as 
25agent shall be of the same legal force and validity as if the 
26service had been personally made upon the producer.

27(2) If service cannot be made upon the producer in the 
28manner provided by other laws of this Commonwealth relating 
29to service of process, service may be made upon the Secretary 
30of the Commonwealth, and a copy of the process or notice
 

1shall be personally served upon an agent or representative of 
2the producer who may be found within this Commonwealth or, 
3where no agent or representative may be found, a copy of the 
4process or notice shall be sent via registered mail to the 
5producer at the last known address of the producer's 
6principal place of business, home office or residence.

7§ 3720. Refunds.

8Under Article XXVII of the act of March 4, 1971 (P.L.6,
9No.2), known as the Tax Reform Code of 1971, the department
10shall refund all taxes, interest and penalties paid to the
11Commonwealth under this chapter to which the Commonwealth is not
12rightfully entitled. Refunds shall be made to the person or the
13person's heirs, successors, assigns or other personal
14representatives who paid the tax, except that no refund shall be
15made under this section regarding a payment made by reason of an
16assessment if a taxpayer has filed a petition for reassessment
17under section 2702 of the Tax Reform Code of 1971 to the extent
18the petition is adverse to the taxpayer by a decision which is
19no longer subject to further review or appeal. Nothing in this
20chapter shall prohibit a taxpayer who has filed a timely
21petition for reassessment from amending the petition to a
22petition for refund where the petitioner paid the tax assessed.

23§ 3721. Refund petition.

24(a) General rule.--Except as provided for in subsection (b),
25the refund or credit of tax, interest or penalty provided for by
26section 3720 (relating to refunds) shall be made only if the
27person who has paid the tax files a petition for refund with the
28department under Article XXVII of the act of March 4, 1971
29(P.L.6, No.2), known as the Tax Reform Code of 1971, within the
30time limits of section 3003.1 of the Tax Reform Code of 1971.

1(b) Natural gas severance tax.--A refund or credit of tax, 
2interest or penalty paid as a result of an assessment made by 
3the department under section 3705 (relating to natural gas 
4severance tax registration) shall be made only if the person who 
5has paid the tax files with the department a petition for a 
6refund with the department under Article XXVII of the Tax Reform 
7Code of 1971 within the time limits of section 3003.1 of the Tax 
8Reform Code of 1971. The filing of a petition for refund under
9this subsection shall not affect the abatement of interest, 
10additions or penalties to which the person may be entitled by 
11reason of the payment of the assessment.

12§ 3722. Rules and regulations.

13The department shall enforce this chapter and may prescribe,
14adopt, promulgate and enforce regulations consistent with this
15chapter relating to the administration and enforcement of this
16chapter and the collection of taxes, penalties and interest
17imposed under this chapter. The department may prescribe the
18extent, if any, to which the regulations shall be applied
19without retroactive effect.

20§ 3723. Recordkeeping.

21(a) General rule.--A person liable for a tax imposed under
22this chapter, or for the collection of the tax, shall keep
23records, render statements, make returns and comply with the
24regulations as the department may prescribe regarding matters
25pertinent to the person's business. If necessary, the department
26may require a person, by notice served upon the person or by
27regulations, to make returns, render statements or keep records
28as the department deems sufficient to show whether or not a
29person is liable to pay tax under this chapter.

30(a.1) Records.--Records to be maintained under subsection

1(a) are as follows:

2(1) Wellhead meter charts for each reporting period and
3the meter calibration and maintenance records. If turbine
4meters are in use, the maintenance records will be made
5available to the department upon request.

6(2) Records, statements and other instruments furnished
7to a producer by a person to whom the producer delivers for
8sale, transport or delivery of natural gas.

9(3) Records, statements and other instruments as the
10department may prescribe by regulation.

11(b) Records of nonresidents.--A nonresident who does
12business in this Commonwealth as a producer must keep adequate
13records of the business and of the tax due as a result. Records
14shall be retained within this Commonwealth unless retention
15outside this Commonwealth is authorized by the department. The
16department may require a taxpayer who desires to retain records
17outside this Commonwealth to assume reasonable out-of-State
18audit expenses.

19(c) Keeping of separate records.--A producer who is engaged
20in another business which does not involve the severing of
21natural gas taxable under this chapter shall keep separate books
22and records of the business so as to show the taxable severing
23of natural gas under this chapter separately from other business
24activities not taxable hereunder. If a person fails to keep
25separate books and records, the person shall be liable for a
26penalty equaling 100% of tax due under this chapter for the
27period where separate records were not maintained.

28§ 3724. Examinations.

29(a) General rule.--The department or an authorized agent of
30the department may examine the books, papers and records of a

1taxpayer in order to verify the accuracy and completeness of a
2return made or, if no return was made, to ascertain and assess
3the tax imposed by this chapter.

4(b) Preservation.--The department may require the
5preservation of all books, papers and records for a period
6deemed proper by the department but not to exceed three years
7from the end of the calendar year to which the records relate.

8(c) Access.--Each taxpayer must give to the department or
9the department's agent the means, facilities and opportunity for
10examinations and investigations under this section.

11(d) Further powers.--The department may examine a person,
12under oath, concerning the taxable severing of natural gas by a
13taxpayer or concerning another matter relating to the
14enforcement or administration of this chapter and may compel the
15production of books, papers and records and the attendance of
16all persons whether as parties or witnesses whom the department
17believes to have knowledge of relevant matters.

18(e) Procedure.--The procedure for a hearing or examination
19shall be as provided under the act of April 9, 1929 (P.L.343,
20No.176), known as The Fiscal Code.

21§ 3725. Unauthorized disclosure.

22Information gained by the department as a result of a return,
23examination, investigation, hearing or verification required or
24authorized under this chapter shall be confidential except for
25official purposes and except in accordance with proper judicial
26order or as otherwise provided by law, and a person unlawfully
27divulging the information commits a misdemeanor and shall, upon
28conviction, be sentenced to pay a fine of not more than $1,000
29and the cost of prosecution or to imprisonment for not more than
30one year, or both.

1§ 3726. Cooperation with other governments.

2(1) Notwithstanding section 3718 (relating to tax suit
3reciprocity), the department may:

4(i) Permit any of the following to inspect the tax
5returns of a taxpayer:

6(A) The Commissioner of the Internal Revenue
7Service of the United States.

8(B) The proper officer of a state.

9(C) The authorized representative of an entity 
10listed under clauses (A) or (B).

11(ii) May furnish to the commissioner or officer or 
12to either the commissioner's or the officer's authorized 
13representative an abstract of the return of a taxpayer.

14(iii) Supply the commissioner or the officer or the
15commissioner's or officer's authorized representative
16with information concerning an item contained in a return
17or disclosed by the report of an examination or
18investigation of the return of a taxpayer.

19(2) Access under paragraph (1) shall be granted only if 
20the laws of the United States or another state grant 
21substantially similar privileges to the proper officer of the 
22Commonwealth charged with the administration of this chapter.

23§ 3727. Bonds.

24(a) Taxpayer to file bond.--

25(1) The department may require a bond in the following
26situations:

27(i) A nonresident natural person, foreign 
28corporation, association, fiduciary or other entity, not 
29authorized to do business within this Commonwealth or not 
30having an established place of business in this
 

1Commonwealth and subject to the tax imposed by section 
23703 (relating to imposition of tax), may be required to 
3file a bond that is:

4(A) Issued by a surety company authorized to do
5business in this Commonwealth.

6(B) Approved by the Insurance Commissioner as to 
7solvency and responsibility.

8(C) In an amount as the department may fix, to 
9secure the payment of a tax or penalty due or which 
10may become due from a nonresident natural person, 
11corporation, association, fiduciary or other entity 
12whenever the department deems it necessary to protect 
13the revenues obtained under this chapter.

14(ii) If a person is petitioning the department for
15reassessment in the case of an assessment over $500 or
16where, in the department's opinion, the ultimate
17collection is in jeopardy.

18(iii) For a period of three years, the department
19may require a bond of a person who has, on three or more
20occasions within a 12-month period, either filed a return
21or made payment to the department more than 30 days late.

22(2) If the department determines a taxpayer is required 
23to file a bond, the department shall give notice to the 
24taxpayer specifying the amount of the bond required. The 
25taxpayer shall file the bond within five days after notice is 
26given by the department unless, within five days, the 
27taxpayer shall request in writing a hearing before the 
28secretary or the secretary's representative. At the hearing, 
29the necessity, propriety and amount of the bond shall be 
30determined by the secretary or the secretary's
 

1representative. The determination shall be final and the 
2taxpayer shall comply with it within 15 days after notice is 
3mailed to the taxpayer.

4(b) Securities in lieu of bond.--In lieu of the bond 
5required under this section, securities approved by the 
6department or cash in a prescribed amount may be deposited. The 
7securities or cash shall be kept in the custody of the 
8department. The department may apply the securities or cash to 
9the tax imposed under this chapter and interest or penalties due 
10without notice to the depositor. The securities may be sold by 
11the department to pay the tax and interest or penalties due at 
12public or private sale upon five days' written notice to the 
13depositor.

14(c) Failure to file bond.--The department may file a lien 
15under section 3717 (relating to tax liens) against a taxpayer 
16who fails to file a bond when required to do so under this 
17section. All funds received upon execution of the judgment on 
18the lien shall be refunded to the taxpayer with 3% interest, 
19should a final determination be made that the taxpayer does not 
20owe payment to the department.

21§ 3728. Account established.

22(a) Establishment.--The Natural Gas Severance Tax Account is
23established as a restricted account within the General Fund.

24(b) Deposit.--The proceeds of the tax imposed under section 
253703 (relating to imposition of tax) and penalties and interest 
26imposed under this chapter shall be deposited into the account.

27§ 3729. Distributions and transfers.

28(a) Quarterly distributions.--On the last business day of
29each period of three calendar months, the State Treasurer shall
30distribute all funds in the account to the Motor License Fund.

1(b) Use.--All money transferred from the account to the
2Motor License Fund shall be used for transportation expenses.

3Section 2. This act shall take effect immediately.